Opinion

Europe can set the standard on anti-money laundering

Money launderers, corrupt politicians, tax dodgers and traffickers of all sorts rely on the same things to move their ill-gotten gains. They need legal structures that allow them to hide their identity.

This often happens through anonymous companies whose beneficial ownership is hidden. European leaders have a unique chance to curb these shell companies in the ongoing review of the European Union’s anti-money laundering rules.

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To ensure cash or assets are efficiently processed, corrupt officials and politicians require professional bankers, lawyers and accountants willing to help them.

Either these professionals are negligent because they do not ask too many questions about where money or assets comes from. Or they play a central role in making sure it is impossible to identify where corrupt money originates from and who controls it.

This is borne out by a survey conducted in 2011 by the UK’s Financial Services Authority (now the Financial Conduct Authority).

This concluded that three quarters of the 27 banks it surveyed had inadequate procedures in place to spot and block tainted money.

The FSA study suggested that a fifth of the banks surveyed failed to identify indirect beneficial owners who exercised ultimate control.

The true customer of corrupt assets can hide behind complicated corporate structures (imagine a Russian Matryoshka doll: a company inside a company, inside a company) that makes uncovering the true nature of transactions and their beneficiaries very difficult.

The modus operandi of illicit financial flows are not aberrations, but part of a structural problem.

Governments across the world should take action to tackle this problem by promoting transparency of the ownership and control of companies.

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